Reports from the Indonesian capital, Jakarta, suggest that interim president B.J. Habibie has been virtually stripped of his powers, with effective command passing to Defence Minister and armed forces chief General Wiranto. Regardless of the precise outcome, this week's events show that the military remains the real force in Indonesia, despite the so-called democratic changes of the past 18 months.

The clearest indication that Habibie had lost his authority came with the declaration of martial law in East Timor on Monday. General Wiranto had pushed for the declaration at a plenary meeting of the Cabinet but was turned down. However, only hours later, following a meeting with Habibie, he secured a decree invoking martial law.

The martial law declaration was followed by a flurry of rumours that Habibie had been deposed in a coup by the military. On Wednesday, Wiranto emerged from a three-hour meeting with Habibie to deny that a coup had been carried out, saying the rumours were baseless and that they were an attempt to disturb national security. However, a Habibie presidential aide said the rumours had been created by the military.

In addition to Wiranto, those attending the meeting included Foreign Affairs Minister Ali Alatas, Home Affairs Minister Lt. Gen. Syarwan Hamid and the chiefs of all three military forces as well as the National Police chief General Roesmanhadi.

According to a report in the September 10 edition of the Australian Financial Review Habibie “was given a choice of stepping down immediately or saving face by remaining in office until Indonesia's highest parliament, the People's Consultative Assembly, meets in two months time to elect his successor. He chose the latter, but had to agree to, in effect, hand power to General Wiranto.”

Indications that Habibie has been reduced to a virtual figurehead were underscored by his sudden decision on Wednesday to cancel all out-of-town activities, including his scheduled visit to Auckland, New Zealand to attend the Asia Pacific Economic Co-operation (APEC) summit meeting at the weekend.

According to the AFR report, Habibie's top adviser Dewi Fortuna Anwar has warned that rightwing nationalist forces were a threat to the president's position. Demands by foreign nations for peacekeeping forces to be sent to East Timor played into the hands of his enemies, she claimed, and could be a threat to the “democratic experiment” in Indonesia.

In its editorial on Friday entitled “Who's in charge here? the Jakarta Post pointed to the “strong pressure” on Habibie from within his own Cabinet, as well as the military and his political opponents.

“Although the rumours of his resignation, or a military take over, have been denied, the events of the past few days left a deep impression that Habibie's wings have been clipped, especially on the question of East Timor. Abroad, he is blamed for the violence in East Timor. At home, he is more criticised for letting the ballot proceed and then consequently losing it.”

The origins of the conflict with Wiranto lie in the decision by Habibie last January that East Timor should be allowed to separate from Indonesia. This was bitterly opposed by the military, fearing that it would lead to separatist movements in other regions of the archipelago.

In discussions with the United Nations, the Habibie regime opposed the holding of a referendum, with Foreign Minister Alatas warning that bloodshed would result. However, at the insistence of the former colonial power Portugal, the UN secretary-general Kofi Annan demanded that a referendum be conducted. Portugal, which has never renounced its claim to East Timor following the collapse of its rule in 1975, has sought to reassert its authority ever since the discovery of major oil and gas resources in the region at the end of the 1980s.

Habibie tried to balance between the demands of the major powers for a referendum and the opposition of the military by promoting the view that it would be possible to ensure that even if the ballot was not in favour of the Indonesian regime's proposal for autonomy, the result would be sufficiently close for it to be challenged. But Habibie's manoeuvres collapsed in the face of the 78.5 percent vote in favour of independence, whereupon the military launched a bloody pogrom against independence supporters through the so-called militia forces.

The conflict within the Indonesian ruling elite over East Timor is directly feeding into the power struggle to decide the next president at the MPR (People's Consultative Assembly) meeting in November.

The leading opposition candidate Megawati Sukarnoputri of the Indonesian Democratic Party of Struggle (PDI) has blamed the violence in East Timor on the “double-standard” policy of the Habibie regime.

Reading from her party's official response to the result of the ballot, Megawati said: “On the one hand it offered a referendum, but on the other hand it exerted undercover efforts to maintain East Timor as a part of the Republic of Indonesia through any means.”

Megawati echoes the criticisms of the military, which accuses Habibie of weakening the Indonesian nation. Megawati said she would demand Habibie's accountability for all “political speculations in regard to the East Timor case, which has inflicted harm to our nation state.”

In a policy statement last month, Megawati attacked Habibie for breaching the MPR decree that endorsed East Timor's incorporation into the Indonesian republic—a criticism also voiced by the military.

In a speech on Tuesday, Megawati said that Habibie as head of state, head of the government and supreme commander of the Indonesian military had to be held accountable for violence in East Timor. She appealed to the Indonesian people “not to let this nation be overwhelmed any longer by anxiety which stems from some policies taken by government figureheads who tend to put their political ambitions before national interests.”

Megawati's appeal to “national interests” is aimed at winning support from the military, which denounces Habibie's agreement to hold the referendum in the same terms. According to a report in the Jakarta Post Megawati was “close to tears when she spoke of widows and children of the thousands of servicemen killed to defend Indonesia' sovereignty over East Timor.”

This week's moves by Wiranto against Habibie point to a possible outcome of the presidential ballot in the MPR, in which the military will exercise considerable power, both indirectly and directly with its bloc of 38 votes.

Megawati, with the support of the military, may well be installed as a figurehead president, with General Wiranto as her vice-president exercising real power behind the scenes.